Jan. 23 (Bloomberg) -- Google Inc., owner of the world’s
largest search engine, rose the most since 2011 after reporting
profit that topped analysts’ estimates as advertisers boosted
spending to reach consumers during the holiday season.

Fourth-quarter profit, excluding certain items, rose to
$10.65 a share, Google said in a statement yesterday. Analysts
had projected per-share earnings of $10.50, according to data
compiled by Bloomberg. The adjusted figure excludes items such
as taxes tied to stock-based compensation. Net income rose 6.7
percent to $2.89 billion, or $8.62 a share.

Google’s earnings were boosted after retailers poured money
into online advertising and extended the gift-buying season.
Total U.S. e-commerce spending jumped 14 percent during the last
two months of 2012 as retailers began promoting Web deals
earlier, according to ComScore Inc. That’s helping compensate as
Google relies more on mobile advertising, which tends to be less
lucrative than ads on traditional computers.

“People were probably expecting something more on the
downside, and results were pretty good,” said Benjamin
Schachter, an analyst at Macquarie Securities USA Inc., who has
a buy rating on the stock. “The transition to mobile is still a
work in progress, but they are showing they can manage that
process quite well.”

The shares of Mountain View, California-based Google rose
5.5 percent to $741.50 at the close in New York, their biggest
gain since October 2011.

Ad Costs

Rates for mobile ads can be about 55 percent less than for
promotions on desktop machines, according to Covario Inc., an
online marketing agency. Still, Google managed to tap the brakes
on the pace of decline in the average amount advertisers paid
each time a user clicks on a promotion. The so-called cost per
click decreased 6 percent, following a 15 percent decline in the
previous period. The total number of clicks advanced 24 percent,
after a 33 percent increase in the third quarter.

“We ended 2012 with a strong quarter,” Chief Executive
Officer Larry Page said yesterday on a conference call. “I am
incredibly optimistic about the opportunities we have as a
technology company focused on user benefits.”

Global Gains

Page, who refrained from joining an earnings call last year
due to difficulties with his voice, spoke in quiet tones and a
voice that sounded hoarse at times.

International markets represented 54 percent of sales, up a
percentage point from a year earlier and in the third quarter.
Google benefited from strength in Northern European markets,
Nikesh Arora, chief business officer, said during the call.

Google made a $12.4 billion purchase of smartphone-maker
Motorola Mobility Holdings last year. In August, Google said it
would cut 4,000 Motorola jobs and close about a third of its 90
facilities. Arris Group Inc. agreed to buy the Motorola Home
unit for $2.35 billion in December.

With the cutbacks, Motorola now can focus on its handset
business, which uses Google’s Android operating system to run
the smartphones. Still, the Motorola unit had a net operating
loss of $353 million.

Android Push

“We do care about profitability, and that is our goal with
every one of the areas where we invest,” Patrick Pichette,
chief financial officer, said during the call. “We’ve made a
ton of progress.”

He said that Google’s effort to bring faster network
service to users in Kansas City is performing well. The company
is considering expanding the service in the future, he said.

Android, which is provided for free to manufacturers, has
become a key part of the company’s push into mobile, giving
Google access to user data around the world. Android snared 72
percent of the global smartphone market in the third quarter,
according to Gartner Inc.

The company also has a leadership position in search, its
core business. Google grabbed 67 percent of the market in the
U.S. in December, according to ComScore Inc. That compares to 16
percent for Microsoft Corp. and 12 percent for Yahoo! Inc.

Despite its lead, Google could come under pressure from
Facebook Inc., owner of the world’s largest social-networking
service. Last week, Facebook announced a new search tool that
lets users discover people, photos, places and interests on the
service.

When fully rolled out, the feature could give Web users an
incentive to use Google less. Facebook also has a partnership
with Microsoft’s Bing search engine, which will deliver
additional results from the Web when Graph Search doesn’t
deliver clear answers to queries.